GROWTH IN SALES FOR HOLIDAY PERIOD IS LOWEST IN YEARS

By CONSTANCE L. HAYS

Published: December 27, 2002

After examining sales figures from the last frenzied hours before Christmas, experts yesterday declared this year's holiday season the worst in many years.

Michael P. Niemira, a retail analyst in New York for Bank of Tokyo-Mitsubishi, said the growth in United States retail sales for the months of November and December, at 1.5 percent, was the lowest it had been since at least 1970, when the bank began keeping track. A spokesman for the National Retail Federation, one of the industry's more upbeat forecasters, said its original estimate of 4 percent growth for December would probably shrink to 3.5 percent.

Wal-Mart Stores, the nation's biggest retailer, announced yesterday that it was lowering its estimates of December sales growth in stores open at least a year. The company said its sales would increase by just 2 percent to 3 percent this month instead of the 3 percent to 5 percent it had forecast earlier. Last year, Wal-Mart posted December sales growth of 8.1 percent.

The idea that even Wal-Mart, the biggest success story in retailing in recent years, was struggling was taken as a sign of wider problems. ''This confirms our previous thoughts that holiday sales could be the worst in a decade,'' Deborah Weinswig, a retail analyst for Salomon Smith Barney, wrote in a note to investors after the Wal-Mart announcement.

On Tuesday, Federated Department Stores said its sales in the third week of December fell below expectations, and it warned that sales for November and December would be less than anticipated. The company, which owns Bloomingdale's and Macy's, had predicted a drop of 2.5 percent, compared with the same period last year. Best Buy, a large electronics retailer, said weak sales would cut into profits.

Worry about the economy and about an impending war with Iraq and new terrorist attacks kept many shoppers from buying, even with deep discounts on many items. Indeed, inventories actually crept up this month, said Scott Krugman, a spokesman for the National Retail Federation. ''We might be seeing unplanned markdowns'' as retailers try to entice people to shop, he said.

At the same time, lower prices meant that in many cases the same gifts could be bought for less money this year. That was good news for shoppers if not for retailers and manufacturers.

Over the next week, many shoppers are expected to visit stores to cash in gift certificates and gift cards and to exchange presents. In the process, they will buy other things as well. Mr. Krugman says those shoppers can produce 10 percent of all holiday sales.

Some stores were offering markdowns of as much as 75 percent yesterday. And some reported plenty of traffic. At Bergdorf Goodman in Manhattan, Ronald L. Frasch, the chief executive, said the store was filled with people exhibiting ''a very strong, strong interest in buying things for themselves.'' He added that the store had met its expectations for the season but would not reveal numbers until next month.

At Wal-Mart, a pair of good late-December days were not enough to reverse the generally sluggish holiday shopping. ''We had two days, Saturday the 21st and Monday the 23rd, with over a billion dollars,'' said a Wal-Mart spokesman, Tom Williams, ''but the increase was too late and too little for us to reach our sales plan.''

Shoppers have been holding out for bargains all month even as retailers have tried to attract them with discounts, sales and ''bouncebacks,'' which offer discounts on future purchases. With few arresting new products on the market, and many people feeling that they already own enough suits, shoes, toys and electronic gadgets, shoppers have been thronging stores to look, but not necessarily to buy. And those who do have jobs have expressed concern that they may lose them, or have their hours cut.

''Spending is more subdued because for three years, economists have been telling people that the situation would get better,'' said Burt Flickinger III, a partner in Strategic Resource Group, a retail consulting firm. ''And instead, it got worse.''

Among the items that performed below expectations at Wal-Mart in the four days that began Dec. 21 were boys' and men's apparel and small appliances, Mr. Williams said. Among the big sellers as Christmas approached were electronics -- including items like DVD players -- and holiday decorations.

''That tells you that people were really buying close to the event,'' Mr. Williams said, referring to the decorations.

Post-Christmas sales began yesterday, but no one expects them to counter the dismal trend. Many stores said they would have no specific sales figures until next month, when they release their December sales figures.

Target Stores, a unit of the Target Corporation, said earlier this month that its December sales would fall short of expectations. FAO Inc., which owns the FAO Schwarz and Zany Brainy chains, said Tuesday that it would close 70 of its toy stores by March in an attempt to return to profitability. At Kmart, where hopes were high for strong holiday sales, a spokeswoman said she could not provide sales figures, but she did say that several toys, including Bratz dolls and Spider-Man walkie-talkies, had done well. The fragrance department, led by Joe Boxer perfumes for men and women, also showed strength, she added.

At Sears, a spokeswoman said the holiday season showed a typical pattern: strong the day after Thanksgiving, then a lull for two weeks, then what she called a crescendo. The spokeswoman, Jan Drummond, said strong sellers included DVD-VCR players and a combination microwave-toaster. Child-size tool benches, sold under the My First Craftsman label, also did well, and when the weather cooled, so did scarves, hats and gloves.

This was the first holiday season in which Lands' End clothing was for sale in about 180 of Sears's 870 stores, following Sears's acquisition of Lands' End last May. Ms. Drummond said the Lands' End line ''was popular and did well'' and added that it would not be on sale in the coming week, although many other items were marked down by as much as 75 percent.

At J. C. Penney, a spokesman said that the store was anticipating sales growth of 1 percent to 3 percent and that the final days before Christmas ''certainly didn't do anything to change that expectation.'' Sales of jewelry, children's clothing and small appliances were all strong, said the spokesman, Tim Lyons, although catalog sales are expected to fall by 20 percent from last year.

At Nordstrom, store traffic was described as brisk by a spokeswoman, and big sellers included Juicy Couture velour outfits, washable suede jackets and pots of body glitter. At Best Buy, the electronics chain, a spokeswoman said stores were busy and top sellers included laptop computers and DVD players. ''DVD players have pretty much become affordable for everybody,'' said the spokeswoman, Donna Beadle.

Even the good news seemed hardly good enough. ''A 3.5 percent increase is modest at best,'' Mr. Krugman said. ''It does not represent a strong increase.''